Homeware retailer Dunelm (DNLM) has reported a decline in sales growth last quarter, but said its value-for-money model would shelter it in a worsening retail climate.
Dunelm, which trades as Dunelm Mill and has stores in Birmingham and Oldbury, said like-for-like sales fell 2.4 per cent during the three months to June 28, its first dip after seven consecutive quarters of sales growth.
The retailer said like-for-like performance in the final quarter of its financial year, covering the period to June 28, was measured against a particularly strong sales period last year when footfall was encouraged by the rainy weather.
Dunelm chief executive Will Adderley, the son of the firm’s founders Bill and Jean, said: “Whilst many home-related retailers are feeling an impact from negative macro-economic factors, Dunelm is more resilient than most –‘simply value for money’ is more appealing than ever at times like this.
“As for the coming financial year, we have to assume that the market will continue to get tougher.
“However we have a very strong balance sheet and healthy cash generation so we remain extremely well-placed to exploit market weakness.”
Mr Adderley added that the firm aimed to continue outperforming its peers in existing stores as well as taking advantage of increased opportunities to roll out new stores.
“We are as determined as ever to keep expanding the business and there is still huge potential for us to keep growing our store portfolio,” he said.
Dunelm has seen underlying sales performance gradually diminish during the past year, falling flat for the six months ended June 28, and 2.5 per cent up over the 12-month period.
But Mr Adderley said Dunelm was better placed to cope than some of its rivals because of its focus on low prices and because shoppers usually only spent about £30 on an average visit.
Broker Citi said the figures were in line with forecasts, but warned Dunelm was not immune from weakening consumer spending.
“Despite attractive margins, low average customer spend, and the relatively “maintenance” nature of purchases, we see downside risk to forecast as the consumer weakens further,” said Citi.
Last year the retailer added eight superstores, including in Shoreham in West Sussex, Aberdeen, Leeds and Bournemouth,
The firm said it has signed leases for seven units to be opened in the current financial year or early next financial year.
“Conditions in the retail property market continue to favour strong occupiers and Dunelm is confident that the number of new openings in FY09 will at least equal the figure for FY08,” the firm said.
Dunelm has also embarked on a refit programme in its older stores, typically on a cyclical five-to-seven year basis.
It said a store which underwent a £500,000 refit in April had outperformed the rest of the estate and that further refits are planned at a rate of five to 10 stores per year.
Dunelm, which now has 89 stores across the country, was set up in 1979 as a market stall selling ready-made curtains.
The company opened its first shop in Leicester in 1984 and the first superstore was launched in 1991.
Will Adderley took over full responsibility for the day-to-day running of the company from his father in 1996.
The majority of Dunelm’s stores are located out-of-town, offering free parking, with the most recently opened superstores trading from around 25,000 to 30,000 sq ft.
In total, Dunelm currently trades from approximately 1.9 million sq ft, selling curtains, bedding, blinds, rugs and lighting.